Economics for Business Essay

College
Essay
Miscellaneous
Pages 5 (1255 words)
Download 0
Real business cycle theory is a class of theories explored first by John Muth (1961), and associated most with Robert Lucas. The idea is to study business cycles with the assumption that they were driven entirely by technology shocks rather than by monetary shocks or changes in expectations.

Introduction

Parkin and Bade go on to explain: A business cycle is not a regular, predictable, or repeating phenomenon like the swing of the pendulum of a clock. Its timing is random and, to a large degress, unpredictable. A business cycle is identified as a sequence of four phases:
Take United Kindom for example,since 1980, before 1992, the British government has been beset with up to 10% inflation race. "inflation is rising and the current account of the balance of payments is moving into deficit."(Sloman, J. & Sutcliffe: 2001). Since 1992, because the government embarked on a massive programme of reform of labor market, putting up the labour productivity; the monetary policies to halt inflation have been successful, the British GDP was with an average annual growth rate of 2.5 percent. But at the same time, "In the expansion phase, growth is high and unemployment is falling."(Sloman, J. & Sutcliffe: 2001). See the following data for reference:
In the United States, the National Bureau of Economic Research, an independent research institution, determines the official dates of peaks and troughs in U.S. business cycles. The following table shows the NBER monthly dates for peaks and troughs of U.S. business cycles since 1890.( Romer, Christina D: 1986)
During deflationary period, there exists a persistent decrease in the level of consumer prices or a persistent increase in the purchasing power of money because of a reduction in av ...
Download paper
Not exactly what you need?

Related papers

Business Economics Bachelor Essay
The greatest advantage of the Euro is that there is regional currency stability due to the fixed exchange rates. The Euro has led to price stability within the EU characterized by low inflationary trends and stable public finances. This has increased the credibility of the Euro due to large currency zone thus stability against the speculation. This credibility is reinforced by a common monetary…
Economics essay
Fortunately, Economists are getting their due importance in policy making. It's economists who shout both in praise and against all policy decisions of different countries. And at least in a few cases, they themselves get divided in ideas and concepts. Regarding certain policies a group of economists come up with words and swords against another group of economists. Each group depends upon…
Business Economics
Wessels however points out that this does not necessarily mean that the citizens of the US have better living standard than their counterparts in the UK. (21). GDP therefore cannot be used as the sole factor in measuring the living standards of the citizens of a country. However chances are that a country with a high GDP has a better standard of living than that with a low GDP.…
Economics for Business Essay
Parkin and Bade go on to explain: A business cycle is not a regular, predictable, or repeating phenomenon like the swing of the pendulum of a clock. Its timing is random and, to a large degress, unpredictable. A business cycle is identified as a sequence of four phases:…
business and managerial economics Essay
Usually the higher aggregate income, the higher demand. In some instances less in absolute terms is demanded as income changes, for instance bus transportation and cheap products in general, if cheap implies low quality. Hence as income rises consumers may demand more in quantity and/or will move up the price-quality continuum. In some instances consumers demand more as income rises but not…
Micro Economics High School Essay
Therefore, in order to counter this market failure, government intervenes, takes taxes from people and provides them the goods which are not provided by price mechanism, such as street lights, light houses, police etc…
Business Economics College Essay
As a top partner at an accounting firm, I would put in place a high powered internal team that would have sweeping powers and would be responsible to study past failures, recommend and implement changes and more importantly, conduct a random or systematic 2nd round of auditing on team/partners/clients. (The Demise of Arthur Andersen, 2002)…